‘Covid hangover’ for Scottish firms as corporate insolvencies rise
The latest figures from the Accountant in Bankruptcy showed 1,132 corporate insolvencies and 8,004 personal insolvencies in 2022-23.
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Your support makes all the difference.Scotland’s businesses are still suffering from a “Covid hangover” with new figures showing the number of firms becoming insolvent has reached an 11-year high.
Corporate insolvences rose to 1,132 in 2022-23, with this up by almost a third (32.6%) on the previous year, new figures from the Accountant in Bankruptcy showed.
The 2022-23 total is nearly a fifth (19.4%) higher than pre-pandemic, with 948 insolvencies recorded in 2019-20 – with an expert warning a “further wave of insolvencies is inevitable” unless economic circumstances improve “drastically”.
The Covid hangover continues to hit Scotland’s businesses hard, with the figures published today showing that corporate insolvency numbers are at their highest level in a decade
The statistics also showed a rise in personal insolvencies to 8,004 in 2022-23 – with this up by 3% on the previous year’s total.
However, personal insolvencies – which includes those who go bankrupt as well as people taking out a protected trust deed – were significantly lower than pre-pandemic levels.
The 2022-23 total is down by two-fifths (40.7%) from the 13,491 personal insolvencies in 2019-20.
Richard Bathgate, chair of the insolvency and restructuring trade body R3 in Scotland, said: “The Covid hangover continues to hit Scotland’s businesses hard, with the figures published today showing that corporate insolvency numbers are at their highest level in a decade.”
He added: “The figures released today go beyond simply levelling out pre-Covid insolvencies. With labour, stock and energy expenses all surging, even previously successful businesses are now turning to an insolvency process to resolve their financial difficulties.
Mr Bathgate said rising numbers of voluntary liquidations among firms indicated that “more and more company directors are choosing to close their businesses before that choice is taken away from them”.
He continued: “Businesses who made it through the pandemic with support from the Government are considering whether the debt they’ve taken on is sustainable.”
Mr Bathgate continued: “For Scottish consumers, uncertainty is high, and in turn, spending is low. Most are prioritising everyday essentials over more discretionary categories like beauty, home improvements and nights out, leaving these types of businesses particularly vulnerable if this continues.
“Though the economy has shown some unexpected resilience so far this year, with a record low of unemployment levels and rising business confidence, I think a further wave of insolvencies is inevitable in 2023 unless the picture drastically improves.”
He stressed it had been a “tough year for individuals in Scotland” with a rise in people resorting to bankruptcies and protected trust deeds.
Mr Bathgate said: “The transition from the pandemic to the current cost-of-living crisis has been abrupt, leaving many people financially fragile and struggling to make ends meet.
“The rent freeze introduced last year gave tenants in Scotland some stability, particularly for those on low incomes and most vulnerable to insolvency.
“But eyewatering energy bills and food inflation at a 40-year high have limited the impact of these measures.”